USD/JPY: Yen Climbs From Noda’s Pursuance of Stimulus Measures

The Japanese yen lost by 8 pips versus the American dollar as the future of nuclear power in Japan has continued to be an issue, more so, in next month’s election. Even as the ruling Democratic Party of Japan has pledged to wean the country from atomic power by 2030, while the LDP calls for a decision on whether to restart all reactors within the next three years, the uncertainties about whether to prop-up the energy sector sees an unstable economy for the Japanese. The Yen is anticipated to immense in today’s Asian trades seeing that the expected approval of Prime Minister Yoshihiko Noda’s Cabinet of ¥880 Billion of emergency plan, which will boost the stagnant economy.

However, more criticisms arise as Japanese voters view the move of the current Prime Minister to compile stimulus measures is an attraction of more ballots for Noda’s Democratic Party. The government is anticipated to finance the package with part of the ¥940 Billion in remaining reserve funds under the fiscal 2012 budget and will not issue any new debt. Nevertheless, Noda has already instructed his Cabinet to compile a third package that could be financed by an extra budget for the year through March following the Lower House election. The Japanese economy is projected to be en route to recovery with the help of the stimulus measures, along with the pressing on of the BOJ’s pursuance of unconventional monetary policy to support both the government and businesses in the battle against chronic deflation.

Meanwhile, China’s exchange-rate policies are seen making its goods cheaper in overseas markets and costing jobs in the US as the nation deliberately suppresses the value of its currency. The significant undervaluation of the Yuan sees continued weakening for the US trade and industry, both globally and domestically. If the American Treasury department fails to come to terms with China, the US economy will falter as industrial activity slows down. Hence, the envisaged recovery of Japan following the March 2011 earthquake and tsunami deters a short position for the USDJPY pair in today’s Asian session.

Aviv N. Shapiro is a Senior Research Analyst and Business Development Officer for AlgosysFx.